The location choices of multinational firms : the role of internationalization experience and group affiliation

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Document de travail / Working paper

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This paper investigates whether location choices of multinational firms depend on past export, import
or FDI experience on foreign markets, and the experience of other affiliated firms. Using French data,
we observe that 95% of new FDIs are preceded by exports in the same country, whereas 73% are
preceded by imports. Regardless of locations’ observable and unobservable characteristics, we find
that exporting in a given country, and to a smaller extent importing from it, significantly phase is more
systematic for investing in distant countries and for first-time investors, whereas import experience is
significantly correlated with FDI in low-income countries. Location choices not only depend on the
investor’s own international experience, but also on the international experience of other affiliated
firms: firms tend to invest in countries where the group already owns a local affiliate, and are more
likely to invest in a distant country if other affiliated firms are already exporting there. These findings
suggest the existence of coordinated strategies and/or information sharing between affiliated firms.